Wisdom Of Crowds - Effect Research And Implications For Social Trading Communities #tradesocial @swipestox
Wisdom of Crowds - Effect | Reserach and Implications for Social Trading Communities
Apr 15, 2017
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Wisdom Of Crowds - EffectR e s e a r c h A n d I m p l i c a t i o n s F o r S o c i a l T r a d i n g C o m m u n i t i e s
#tradesocial @swipestox
1.72 hours per day on social media
28% + of internet usage is social
8% + growth per year
Social Media – A Base For Wisdom Of Crowds
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“Diversity and independence are important because the best collective decisions are the product of disagreement and contest, not consensus or compromise.”
- James Surowiecki, 2004 -
Wisdom of Crowds – The Quintessence
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Decentrality
Diversity
Independence
Aggregation
Four Axioms Of A Wise Crowd
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No homo oeconomicus, but homo psychologicus
Condorcet Jury Theorem is relevant
Experts can tend to conformity
Decision Independence
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Diverse opinions lead to a wiser crowd
Diversity Prediction Theorem is relevant
Diverse trading could lead to 30% better performance
Diversity Is Key
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Local & specific knowledge from education, motivation etc.
Implicit, subconscious knowledge
Expert crowd might be better
Decentrality – Knowledge Wins
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Aggregation – Compiling The Data
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Aggregation feasible if previous axioms are respected
Aggregation can be constantly refined
Machine Learning might be useful7www.swipestox.com
The Madness of Crowd – Bad Investments
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Wrong decisions can be made Fatal in social trading
Herd behaviour can lead to a mad crowd
Compare your strategy to the 4 axioms 8www.swipestox.com
Endogenous Wisdom Of Crowd - Effect
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One person can slightly increase performance with various opinions
Rethink investment opportunities Try different points of view
Variety is compromised due to subconscious bias9www.swipestox.com
Examples Of Success With Wisdom Of Crowds
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Predictions of indices (Dax, S&P 500 & Dow Jones) using social media
Box-office success of movies that are not even announced but likely
Election results and seat distribution 10www.swipestox.com
Future Research Opportunities
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Prediction models & aggregation of wisdom of crowds
Long-term study of potential benefits of social trading
Usage of algorithms and machine learning11www.swipestox.com
Mobile Social Trading
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Complete flexibility
Connect to the social trading community
Simply copy trades or create a strategy that others follow12www.swipestox.com
Lessons Derived For Social Trading Strategies
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Create as many diverse strategies as possible
Evaluate decisions from various points of view
Aggregate various opinions from the social trading community13www.swipestox.com
Enjoy Your Profits And Be Social
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Become a social trader that others follow
Take some time for yourself and enjoy your profits
Be altruistic and use your profits to make the world a better place14www.swipestox.com
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